Moody's shifts Toll Brothers view to positive

Moody's Investors Service said it changed the outlook for Toll Brothers, Inc. to positive from stable. At the same time, Moody's affirmed Toll's Ba1 corporate family rating and Ba1-PD probability of default rating and the Ba1 rating on the senior unsecured notes of Toll Brothers Finance Corp. The company's speculative grade liquidity rating was upgraded to SGL-1 from SGL-2.

The positive outlook reflects Toll's significant operating scale, the value of its brand, strong cash flow generation and the demonstrated ability to maintain leverage within a relatively narrow band through different industry cycles.

Moody's said it believes the company's operating strategy, including its strong market position as the sole homebuilder in the niche luxury market and its growing diversification into lower price points, affordable luxury segment, which demonstrates stronger growth, its largely build-to-order approach, strong gross margins, strong cash flow and liquidity position provide considerable financial flexibility despite slightly higher leverage than some peers.

The upgrade of Toll's speculative grade liquidity rating to SGL-1 from SGL-2 reflects Moody's expectation the company will maintain a very good liquidity position over the next 12 to 15 months given its strong cash flow generative capabilities, significant availability under its $1.9 billion revolver expiring in 2024 and substantial covenant compliance headroom.

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